Market Risks when Problems aren’t Fixed

Transit cards have one job: get the user through the ticket gate quickly and reliably every time, no questions asked. Because they are bullet proof, fast, highly reliable and also used for e-money purchases, transit cards like Suica and Octopus have evolved beyond transit smartcard systems into transit platforms.

A transit platform becomes even more powerful, flexible, essential and transformative when it is deployed on smartphone digital wallet platforms like Apple Pay, Samsung Pay and Google Pay. When economies of scale and masses of moving people with transit card loaded smartphones come together all kinds of exciting new business possibilities and synergies open up: for transit companies, for local area economies, for merchants, for the digital wallet platforms and for customers.

But this can only happen if the basic transit card job and performance on the smartphone matches the plastic one. It has to be as fast and reliable as a plastic transit smartcard every time. It has to be bullet proof. This is essential. When the smartphone transit card performance is not up to the plastic one, people simply don’t use it and stay with plastic or reach for something else. Ask any daily commuter.

The iPhone X Suica Problem
This is exactly what is happening to iPhone X in the Japanese market, perfectly captured in the following tweet of which you can find plenty more. Apple has not fixed the long running iPhone X Suica problem, 7 months and counting, and for customers who depend on Suica iPhone X is a poorly designed piece of expensive junk. A spec problem. The risk of Apple doing nothing has damaged Apple’s brand value in the Japanese market. A small thing can have big implications and Japan is not the only market where this is happening.

Japanese complaints of iPhone X Suica performance
Japanese complaints of iPhone X Suica performance have been constant

Apple Pay≠Apple Pay Transit
The iOS 11.4 update was originally slated to expand Apple Pay Transit cards beyond Beijing and Shanghai to include Jiangsu, Shenzhen, Wuhan and Chongqing but didn’t make the cut. Why not? China Apple Pay Express Transit cards are all the same spec right? The answer is on the Apple Pay Transit page and in Chinese discussion forums: Apple Pay China transit cards are a glitchy unreliable beta product. Chinese smartphones from Huawei, Xiaomi, Oppo don’t have these problems. Transit cards are different from credit cards because the spec is much higher with tight tolerances, they have to work perfectly every time. Apple Pay≠Apple Pay Transit.

Maybe the beefed up Core NFC changes rumored to be coming with iOS 12 will help Apple fix Apple Pay Transit card problems in the long run but fixing the current problems ASAP should be top priority if Apple wants to protect Apple brand value in the China and Japan markets.

Other Risks
This market risk applies not only to smartphone vendors, it applies to transit companies too. Especially those who are switching from fast, reliable ‘closed’ stored value (SV) systems to ‘open’ slow, glitchy EMV contactless.

People think contactless cards are all the same. They are not: a credit card is not a transit card, it’s not yours. Credit cards are subject to the whims and idiosyncrasies of the issuing bank who can deactivate any card at a moments notice without bothering to tell you. This is a problem when using a credit card as a transit card. Singapore transit users are complaining of fried plastic contactless credit cards and of card issuers deactivating cards mid-transit for being over limit. A stored value transit card is yours with your money stored on it. Locally ‘off line’ processed stored value transit cards will always be faster and safer than credit cards because the FeliCa, MIFARE and CEPAS technology behind them was tailored for transit needs.

The risk to transit companies going ‘open loop’ is that every glitch and problem gets blamed on the transit company, never the payment network or credit card company because people have zero expectations for credit card companies and banks. The transit company ‘brand value’ is damaged by the management whims of other companies.

The other downside it that all the exciting business possibilities and synergies of a transit platform + digital wallet are lost. In this case everybody loses: the transit company, transit area merchants, digital platform vendors and most of all, transit customers.

UPDATE: I incorrectly stated that China Express Transit Beijing and Shanghai cards use MIFARE technology. They used to be MIFARE but migrated to something similar to PBOC 2.0 ED/EP and T-Union cards are a further development but the Apple Pay Express Transit flavor is different.

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